No to Nano: Activists watched a traditional 'horse dance' last week as protests mounted against the car factory in Singur.

Jayanta Shaw/Reuters

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New Delhi — The protests that threatened the roll-out this year of the world's cheapest car, the Nano, ended after archrival politicians in the Indian state of West Bengal reached a last-minute deal Sunday.

But the future of the Nano – as well as the broader issue at the heart of the upheaval – remains unresolved. Construction of the Nano did not resume Monday. Tata Motors, maker of the Nano, said it was not convinced that there is "a long-term congenial environment for smooth operations."

The statement underlines the depth of emotion surrounding the question that ignited the agitation in West Bengal and persists elsewhere: How should uneducated farmers be compensated when their land is taken for India's industrial growth?

It is a topic that straddles the fault line of new and old India – new megaprojects that bring fabulous wealth to a few but few benefits to local farmers, who lack the skills to work there. When these two worlds meet, and farmers feel compelled or coerced into selling their lands, the result is anger and, occasionally, violence.

Last week, Tata shut down its Nano plant in Singur, citing "continued confrontation and agitation at the site."

The deal struck Sunday between West Bengal Chief Minister Buddhadeb Bhattacharya and his main political rival, Mamata Banerjee, seemed to remedy this. She called off her protesters; he agreed to find 220 acres of land for the displaced farmers who refused the government's compensation package.

Despite a $350 million investment in Singur and hopes of rolling out the Nano next month, Tata said Monday that it would not yet reopen the plant because of "limited clarity on the outcome of the discussions between the state government of West Bengal and the representatives of the agitators."

The protests against the Nano facility, which involved a blockade of the plant, are but one example – and hardly the most extreme – of how industry and land rights have conflicted in India.

In another part of West Bengal last year, protests led to a clash in which 14 people were killed and cadres of the state's ruling Communist party were accused of rape and brutality. Residents of Nandigram opposed the state's decision to allow an Indonesian firm to build chemical plants there. The plans were later dropped.

Earlier in 2007 in the state of Orissa, four engineers from the South Korean steel producer Posco were abducted for a day by villagers opposing the project. More recently, locals have begun squatting on government land transferred to the company to stop construction.

Tata has had to cancel two steel projects in Orissa due to local opposition.

The issues are twofold. On one hand, many of the conflicts involve India's "tribals," indigenous groups who live a subsistence lifestyle in India's remotest forests. These lands also happen to be India's richest trove of minerals, and as mining companies move in, tribals are being displaced from the only life they have ever known.

India's state governments have also, in some cases, leapt headlong into industrialization without proper consideration of those who will be displaced by it, Mr. Kapur continues: "There are a lot of elements of raw capitalism at work, and it is not always pretty."

He says this not in condemnation of capitalism but of the Wild West mentality that has at times typified India's embrace of free-market economics since the country liberalized in 1991. Rather than acting as a check on the natural tendencies of businesses to maximize profits, the government has at times amplified them in the rush for investment money, he and others say.

The Nano plant is a case in point, Kapur says. In its attempt to lure Tata, West Bengal bought the land for the company. But nationwide, state involvement on a company's behalf has generally made the compensation process more contentious, not less.

Under a law that dates back to the British raj, state governments can compel landowners to sell their property to them for projects intended for the public good. But states have interpreted the vague Land Acquisition Act in a way that allows them to buy land for economic ventures, such as low-tariff, export-friendly Special Economic Zones. "How do you designate an SEZ as a public good when most of the benefits go to private parties?" says Kapur.

When villagers cut their own deals without state intrusion, "that is when the people are at a bargaining stage" and have some power, says Mr. Mundu.

Indeed, in many instances the transfer of land between farmers and corporations has occurred without conflict. In others – such as Reliance Industries Limited's plans to build industrial and residential campuses outside New Delhi and Mumbai (Bombay) – there are delays, with landowners holding out for higher prices. But negotiations have been peaceful.

Signaling the need for some change, a government panel suggested last month that 70 percent of land for SEZs be bought by companies at market rates. The Land Acquisition Act is also set to be amended.